Rental chain outbids Movie Gallery.

In the continuing battle to acquire video rental chain Hollywood Entertainment Corp., Blockbuster unveiled today (Feb. 2) that it will outbid Movie Gallery's $1.2 billion offer.

Blockbuster filed a statement with the Securities and Exchange Commission saying that it intends to purchase Hollywood for $14.50 a share, or a total of more than $1.3 billion.

Hollywood agreed to Movie Gallery's buy out offer on Jan. 10. One week later, Blockbuster announced that it was still committed to acquiring Hollywood and would consider outbidding Movie Gallery.

"We believe this transaction will provide tremendous value to both Blockbuster and Hollywood shareholders and should better position Blockbuster to compete in the rapidly changing home entertainment marketplace," said Blockbuster chairman/CEO John Antioco in a statement. "Additionally, by combining the companies' store distribution and brand portfolios, we plan to serve more customers in more ways than ever before."

Hollywood Entertainment owns and operates more than 1,920 Hollywood Video stores and 600 Game Crazy stores. Movie Gallery operates more than 2,000 stores.

Blockbuster locations total about 9,000 worldwide.